Standard Chartered shares sink as cautious outlook overshadows 44% profit hike

Emerging markets-focused bank Standard Chartered has seen shares come under pressure after warnings of an “uneven” recovery and supply chain woes took the shine off a 44% jump in profits.

Shares in the group tumbled 8% after it maintained its outlook for flat earnings growth in 2021, despite reporting that third-quarter profits rose to 1.1 billion US dollars (£806 million), from 745 million US dollars (£546 million) a year earlier.

The profits leap was slightly bigger than expected, but investors seized on the cautious outlook comments and took profits after a recent strong run for the stock.

Our third-quarter results: a return to top-line growth with income up 7% and underlying profit before tax up 44%. Full details at https://t.co/PXJhrBY1A7 pic.twitter.com/yAKB8DyLES

— Standard Chartered (@StanChart) November 2, 2021

The company said: “The economic recovery from the Covid-19 pandemic has continued to be uneven and punctuated by supply chain disruption.

“However, we are encouraged by robust levels of export growth across many of our markets in Asia.”

It clouded an otherwise robust set of figures, with third-quarter profits boosted by sharply lower bad debt provisions – down 70% year on year at 107 million US dollars (£78 million).

In August, it announced the release of 47 million US dollars (£34 million) of cash set aside to cover bad debt during the Covid-19 pandemic.

Standard Chartered said credit impairments remained at low levels in the quarter thanks to the wider economic rebound and that it expects this to remain the case in the final three months of 2021.

Chief executive Bill Winters said: “We delivered a return to top-line growth in the third quarter and achieved further progress against our strategic priorities, with strong performance in our financial markets and trade businesses and ongoing positive momentum in wealth management.”

The results come after larger rival HSBC last week delivered a 74% hike in third-quarter profits after releasing 700 million dollars (£513 million) of loan loss provisions.

Banks worldwide haven seen figures flattered by moves to dip into funds put aside for pandemic bad debts as the economy has bounced back.

Chris Beauchamp, chief market analyst at IG, said: “After a 24% bounce from the October low to yesterday’s close, investors are relearning the phrase ‘It is better to travel than to arrive’.

“Still, there was plenty to like in the numbers, even if the outlook was rather cautious.

“But after the rally of the past month, the bank was on a hiding to nothing really, some investors being bound to engage in profit-taking regardless of the actual figures and forecast.”